Redundancy Pitfalls For Employers

An employer may make an employee redundant on the basis that there is a genuine work-related reason or business decision for that redundancy. It must be about the employee’s position, not the employee personally.

In Totara Hills Farm v Davidson (‘Totara’), the Courts demonstrated that they may examine the reasons behind such a business decision, to ensure it was fair and reasonable in the circumstances, and not a cover for some other reason for the dismissal.

In Totara, the Employment Court determined that, although the redundancy did relate to a genuine business decision (to save costs), the savings would not actually be achieved by the dismissal. Because of this, the dismissal was held to be unjustified.

Totara highlights the burden on employers to ensure that, when they make an employee redundant, not only should it be the result of a genuine business decision, but also the redundancy must actually achieve the intended results of that decision.